Promissory Estoppel

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TABLE OF CONTENTS

TABLE OF CASES        X


TABLE OF CASES

Allegheny College v National Chautauqua Bank,

        (1927) 159 NE 173        12

Baird Textile Holdings Ltd v Marks & Spencer plc,

        [2001] EWCA Civ 274; [2002] 1 All ER (Comm) 737        5

Central London Property Ltd v. High Trees House Ltd,

        [1947] KB 130        2, 3, 4, 6, 8

Combe v Combe,

        [1951] 2 KB 215        4

Commonwealth v Verwayen,

        (1990) 170 CLR 394        11

D & C Builders v Rees,

        [1966] 2 QB 617; [1965] 3 All ER 837        5

Hughes v Metropolitan Railway,

        (1877) 2 App Cas 439        6

James Baird & Co v Gimble Bros,

        64 F 2d 344 (2d Cir. 1933)        13

Jorden v Money,

        (1990) 170 CLR 394        11

Legione v Hately,

        (1983) 152 CLR 406        8

The Post Chaser,

        [1981] 2 Lyod’s Rep 695; [1982] All ER 19        5

Walton Stores (Interstate) Pty. Ltd. v. Maher,

        (1988) 62 A.L.J.R. 110        8, 9

Woodhouse AC Israel Cocoa SA v Nigerian Produce Marketing Co Ltd,

        [1972] AC 741        6


QUESTION

“In each case the court held the promise to be binding on the party making it, even though under the old common law it might be difficult to find any consideration for it. The courts have not gone so far as to give a cause of action in damages for the breach of such promise, but they have refused to allow the party making it to act inconsistently with it. It is in that sense, and that sense only, that such a promise gives rise to an estoppel” – Denning J in Central London Property Trust Ltd v. High Trees House Ltd [1947] KB 130 at 134

Discuss.


THE UNITED KINGDOM

Introduction

First and foremost, in the case of Central London Property Ltd v. High Trees House Ltd (hereinafter referred to as “High Trees”), the plaintiffs made a promise to allow the defendants to reduce the rent of a block of flats in London from £2,500 to £1,250. It was made known by both parties that the reduced rent was the result of wartime which causes the defendants unable to pay the original full rent as there were only a few of the flats were let to tenants. Denning J (as he then was) finds that it was implied that the promise will only be enforceable provided that the condition remains. In High Trees, the condition refers to would be the wartime and the lack of tenancy, would allow the promise enforceable despite of the lack of consideration from defendant to stand. However, the original contract suspended for the mean time will come into force when the circumstances of the promise no longer apply. Denning J therefore found that the defendants were bound to pay the original rent of £2,500 after the wartime and when the flats were substantially or fully let out. The general principle in High Tree gave rise to the formation of “promissory estoppel”.


Effects of High Trees’s Promissory Estoppel

The High Trees Promissory Estoppel gives rise to a number of questions in the area of law where taken at face value, the general principle seems totally wipe out the doctrine of consideration. The promise was seen to be legally binding and enforceable according to the general principle where, although no consideration was given by the defendants, both parties were bound to act upon and, in fact, acted upon the promise. According to common law, consideration is the essential element in forming a legally binding contract. However, in High Trees, it was accepted that the promissory estoppel, applying the principles of equity, recognises the promise to be binding. A debate on whether the doctrine of consideration still applies to the formation of contract broke out soon after the judgement. However, there are five suggested limitation in the later cases holding the doctrine back to the original position.


The Limitation of Promissory Estoppel in English Law

Promissory estoppel will only be available when there is an alteration to an existing contract. This can be found in Combe v Combe where the promise of maintenance by the husband was not allowed to apply this doctrine as there is no existing legal relation prior to the promise. Promissory estoppel cannot be applied in Combe v Combe as it was not meant to render unnecessary consideration in forming a contract. This proves that the doctrine of consideration do preserve its role in forming a contract and promissory estoppel will be apply to vary an existing legal relation and the position of the parties involved. In this situation, parties of the promise or contract will be seen as having the intention to perform their legal obligation and were not allowed to go back on their promise. Therefore, without an existing legal relation at the first instance, it is impossible for the court to enforce promissory estoppel to a case.

By way of not allowing the parties to form a legally binding relation without an existing contract, it was also limited to allowing promissory estoppel to be ‘used as a shield, but not a sword’. Legal action will not be available using promissory estoppel as Birkett LJ has clearly said that promissory estoppel can only be employed as a defence to prevent a party from denying their promise when the other party has relied and performed the proper obligation in line with the promise made. It was never accepted in the English law for promissory estoppel to bring a cause of action. Nevertheless, it was argued that this limitation would not be viable since estoppel may be able to assist in establishing the necessary condition for both the cause of action and a defence to thrive. Estoppel, maybe except the “proprietary estoppel”, was never being accepted for cause of action in any area of law as it was not seen as a legal injury. Hence, in Baird Textile Holdings Ltd v Marks & Spencer plc, the judgement gave that in the event the court was to face by a suitable case, this limitation might be reconsidered.

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If the first two limitations are satisfied, the promise must be tested upon which the equitability of the promisor to revoke the promise made. As it can be seen in the case D & C Builders v Rees where the debtor’s wife deliberately made the creditor to accept the part payment in the event of their financial difficulty does not entitle the creditor to be estopped from claiming the outstanding amount. The condition was inequitable since the creditor was forced to accept the part payment and therefore, the court held in the favour of them that the unpaid amount should be ...

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